Haryana challenges ruling allowing higher power tariffs

An employee from the electricity board works on newly installed overhead power cables in Allahabad December 7, 2012. REUTERS/Jitendra Prakash/Files

NEW DELHI (Reuters) - Haryana is challenging in court a decision by the power regulator to allow utility Adani Power Ltd(ADAN.NS) to raise tariffs, dealing a potential blow to a key sector struggling with chronic losses and erratic fuel supplies.

The case filed by Haryana underscores the ability of local politics to derail a regulator decision that was hailed by power companies as a step toward ending electricity shortages that sap the competitiveness of businesses in India, hobbling economic growth.

Haryana is home to the business hub of Gurgaon, where companies rely on costly generators to avoid major and frequent blackouts. Microsoft Corp (MSFT.O), Google Inc (GOOG.O) and agribusiness giant Cargill Inc are some of the multinational firms based there.

State power minister Ajay Yadav told Reuters his government had filed a challenge against an April ruling by the Central Electricity Regulatory Commission (CERC) that paved the way for Adani Power to increase the price at which it sells electricity to state-subsidised power distribution companies.

CERC had also issued a similar ruling favourable to Tata Power Co Ltd (TTPW.NS), which sells to Haryana, but it was not immediately clear if the state would challenge that ruling as well. The regulator is also mulling a decision that could benefit Reliance Power Ltd (RPOL.NS).

“We decided to file an appeal,” Yadav said on Tuesday, referring to the Adani Power ruling which was specific to the company’s operations in Haryana and Gujarat states.

The challenge was filed at the power tribunal and there is no indication when it will be heard as the judicial system is notoriously slow.

An Adani spokesperson did not respond to requests for comment. The company posted a net loss of 5.86 billion rupees in the quarter that ended March 31, more than double the loss incurred over the same period a year ago.

It was not clear if the government of Gujarat would also appeal the ruling. Senior officials at the state energy ministry, who declined to be named as they are not authorised to speak to the media, said they could see the merits of the federal regulator’s ruling in favour of Adani Power.

India sits on the world’s fifth-largest coal reserves, but local utilities rely on costly imports because domestic supplies are patchy as coal mining projects are mired in red tape and corruption.

The government has struggled to balance the needs for private electricity firms to turn a profit while protecting voters in a country with hundreds of millions of poor. A general election, due within a year, could make the issue of power prices especially sensitive.

Yadav said the Haryana government would take part in a committee that was formed to decide the price Adani Power could now charge, although the committee had missed an April 30 deadline to meet.